Impact of Working Capital Management to Financial Failure Index before and during Coronavirus Disease 2019 Pandemic of Listed Companies

Abstract

The objectives of this study were 1) to study the differences of working capital management and related control variables on the financial failure index (Altman’s Z Scores), before and during the coronavirus disease 2019 outbreak, and 2) to study the impact of working capital management on the financial failure index, before and during the coronavirus disease 2019 outbreak of companies listed on the Stock Exchange of Thailand. The industrial groups used in this study is seven (7) industrial groups, excluding the financial industry group. The data collected for this study span five (5) years, from 2017 to 2022. The sample of this study comprises a total of 433 companies, 2,598 firm-year observations. The study employed descriptive statistics and inferential statistics with the Pearson Correlation and multiple regression analysis.

The results of the research found as follows: 1) The study revealed the differences in working capital management as measured by trade receivables turnover and account payable turnover increased during the coronavirus disease 2019 outbreak, resulting in enabling businesses to use more working capital from internal funding sources to repay debts. 2) The differences in related control variables measured by the debt-to-equity ratio were found. The inventory to assets ratio decreased during the coronavirus disease 2019 outbreak, resulting in enabling businesses to rely less on debt for funding sources. 3) Working capital management does not affect the financial failure index. This study employed multiple regression modelling with fixed-effect and analyzed random effects. Hausman's Specification Test is used for model selection. The results indicated that Fixed-Effects Regression was suitable for estimation. The most statistically significant variable is Debt-to-equity ratio, with 99 percent confident interval.